Pharmacy Benefit Managers (PBMs) took a hit from lawmakers during a Thursday hearing held by the Senate Commerce Committee, with some questioning why the drug middlemen are even necessary.
“The way I see the situation on PBMs, I don’t know why the hell they even exist,” said Sen. Jon Tester, D-Montana. “They were set up with all the right reasons … But what I see them doing in my state, I don’t think the consumer gets much benefit and they’re shutting down small businesses on main street right and left and those are called our local neighborhood pharmacies.”
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The hearing discussed how the Pharmacy Benefit Manager Transparency Act would affect transparency among PBMs, which are often blamed for driving up prices in prescription drug costs. The bill would prohibit PBMs from clawing back reimbursement payments and increasing fees or lowering reimbursements to pharmacies. PBMs would also have to report to the Federal Trade Commission (FTC) annually with information on the payments they received from health plans and the fees charged to pharmacies. It was introduced in January by Sen. Maria Cantwell (D-Washington) and Sen. Chuck Grassley (R-Iowa).
Sen. Shelley Capito, R-West Virginia, described the lack of transparency with PBMs as “total confusion.” She said it would be helpful to have a flowchart that starts from the research of the drug to the patient who receives it and what was paid.
“You’ve got the research, the manufacturing, the distributor, the PBM, the insurer, the doctor or hospital, the pharmacy and then it gets to the patient. I guarantee you … if we had that in front of us, it would be more difficult to read than a flowchart from the Corps of Engineers,” Capito said.
Ryan Oftebro, CEO of Kelley-Ross Pharmacy Group, countered that Capito’s description of a flowchart was “not complicated enough.” Oftebro also described his own problems with PBMs, stating that in 2022 his company had to close its pharmacy in the Eastlake neighborhood of Seattle.
“It’s the only pharmacy in the neighborhood and we closed it precisely because of these retroactive fees,” Oftebro said.
Vertical integration has had a major effect on the drug industry, said Erin Trish, co-director of the Leonard D. Schaeffer Center for Health Policy & Economics. Three players — CVS/Caremark, Express Scripts and OptumRx — control 80% of the total PBM market share.
“PBMs are no longer freestanding entities, but instead all of the three biggest PBMs are integrated or owned by a health plan or health insurer,” Trish said. “Many of them also own or have a footprint in the pharmacy market or at least in the specialty pharmacy market and some are in the healthcare provider market as well … They can have an incentive to essentially steer funds to themselves preferentially over to other independent pharmacies.”
Sen. Ted Cruz (R-Texas), meanwhile, said there are things to consider with the bill, specifically the additional powers that would be given to the FTC.
“With every legislative solution, we have got to consider the tradeoffs, especially when our solution is to grant additional authority to a government agency to regulate the particular market,” Cruz said. “Government regulation can create substantial compliance costs. It can also create barriers to entry for competitors in the market.”
The Pharmaceutical Care Management Association, a national organization representing PBMs, released a statement in response to the hearing arguing that the bill will not improve drug costs.
“To be clear, the legislation being discussed today by members of the Commerce Committee does absolutely nothing to lower prescription drug costs,” said PCMA President and CEO JC Scott. “In fact, it risks raising drug costs for patients and employers providing health care coverage. S. 127 fundamentally misconstrues the role of pharmacy benefit companies and unfairly proposes to take away employers’ choice and flexibility in how they construct their pharmacy benefits to best fit the needs of their patient populations.”
Photo: bong hyunjung, Getty Images
